A Human Capital Strategy for Competing in World Markets

After a quarter–century of strong output growth the economies of the Middle East and North Africa entered a period of economic stagnation around 1985. During the 1960s output across the region had grown by about 6.2 percent a year. Growth was led by public sector investments in manufacturing, particularly in the Mashreq region (Egypt, Jordan, Lebanon, and Syria). Development was concentrated in modern, capital–intensive production. Public enterprises were focused on the production of undifferentiated goods, including raw materials and intermediate goods. These enterprises remained economically viable under the protection of high trade barriers; firms that were unable to cover costs with operating revenue received generous subsidies. This development strategy generated a respectable rate of growth, but it also consumed inordinate amounts of capital while producing relatively few jobs.